Authorized Generic Pricing: Why They Cost Less Than Brand-Name Drugs

Have you ever picked up a prescription and noticed two identical pills on the shelf-one with a fancy brand name, another with a plain label-and wondered why the plain one costs nearly half as much? If you’ve seen this and thought it was just another generic, you’re not alone. But what if I told you that the cheaper version isn’t just a copy? It’s the exact same drug, made in the same factory, with the same ingredients, and even the same packaging-except without the brand name. That’s an authorized generic.

What Exactly Is an Authorized Generic?

An authorized generic is a brand-name drug sold under a different label, without the brand’s marketing or logo. It’s not a knockoff. It’s not a generic version made by a different company. It’s the real thing, produced by the original manufacturer and sold under a different name. The FDA requires that authorized generics meet the same strict standards as the brand-name version: same active ingredient, same dosage, same manufacturing process, same quality controls. The only difference? No advertising, no fancy packaging, and no brand-name price tag.

Here’s how it works: When a drug’s patent is about to expire, the brand company can choose to launch its own generic version. They don’t need to go through the usual FDA approval process for generics because they’re already the original NDA holder. So they simply slap a new label on the same pills and sell them at a discount. Sometimes they do this themselves. Other times, they license the right to another company to make and sell it under their own label-but still using the original factory and formula.

Why Do Authorized Generics Cost Less?

The answer is simple: no marketing, no brand premium.

Brand-name drugs carry a huge cost built into their price-not just for research and development, but for advertising, sales reps, patient support programs, and maintaining a recognizable name. When a drug goes off-patent, those costs disappear. Authorized generics don’t need to spend millions on TV ads or convince doctors to prescribe them. They’re already trusted. They’re already proven. So they can undercut the brand by 4% to 8% right out of the gate.

But here’s the twist: that 4% to 8% discount doesn’t always show up at the pharmacy counter. Why? Because Pharmacy Benefit Managers (PBMs) control which drugs go on which tiers in your insurance plan. Sometimes, they put the authorized generic on the same tier as the brand. That means your copay is the same whether you pick the brand or the generic. But if your plan puts the authorized generic on a lower tier, you could pay significantly less. It’s not about the drug-it’s about how your insurance decides to price it.

How Authorized Generics Change the Market

Before authorized generics, the first generic company to enter the market after a patent expired got a 180-day monopoly. That gave them power to set high prices without competition. In fact, some of these first generics charged up to 80% of the brand price during that window.

Then came authorized generics-and everything changed.

When a brand company releases its own generic version at the same time as the first generic, it forces both companies to compete from day one. The result? Prices drop faster and deeper. According to FTC data from 2011 to 2023, when an authorized generic enters the market alongside a traditional generic, the price paid by pharmacies drops by 13% to 18%. Retail prices fall by 8.4% to 10.3%. That’s not a small savings-it’s life-changing for people on chronic medications.

Take the EpiPen, for example. In 2016, Mylan raised the price from $100 to $600. Public outrage followed. Then they launched an authorized generic for $300. That wasn’t just a price cut-it was a strategic move to regain trust while still keeping a big chunk of the market. The same thing happened with Gilead’s hepatitis C drugs Harvoni and Epclusa. Before their patents even expired, Gilead released authorized generics to stay ahead of competitors who were waiting to pounce.

Authorized Generics vs. Traditional Generics

It’s easy to confuse authorized generics with regular generics. Here’s the difference:

• Traditional generics are made by different companies after the patent expires. They must prove they’re bioequivalent to the brand through an FDA review called an ANDA. They’re often cheaper than authorized generics because they don’t have the same production costs.
• Authorized generics are made by the original brand manufacturer (or under their direct control). They use the same facility, same formula, same quality control. No ANDA needed. They’re usually priced just below the brand, not below other generics.

So if you’re looking for the lowest price, a traditional generic from a third-party maker might be cheaper than an authorized generic. But if you want absolute certainty that it’s the same pill you’ve always taken-same color, same shape, same fillers-then the authorized generic gives you that peace of mind.

Who Benefits the Most?

Patients do. But so do insurers and employers.

A 2022 analysis of 1.2 million Medicare Part D patients showed that when authorized generics were placed on the same tier as traditional generics, medication adherence improved by 8.2 percentage points. Why? Because people didn’t have to switch pills. They didn’t have to worry about whether the new version would work the same way. They just filled their prescription and kept taking it.

For insurers, that means fewer emergency room visits, fewer complications, and lower overall costs. For employers offering health plans, it means less spending on high-cost prescriptions. Even the government benefits-Medicaid and Medicare saved billions in the years after authorized generics became widespread.

The Dark Side: Strategic Use or Anti-Competitive Move?

Not everyone sees authorized generics as a win.

Some critics argue they’re used as a tool to delay true competition. Here’s how: A brand company might strike a deal with the first generic manufacturer to delay their entry. In exchange, the brand company releases its own authorized generic to keep the market from flooding with cheaper alternatives. This is called a “pay-for-delay” agreement-and it’s under heavy scrutiny by the FTC and state attorneys general.

Dr. Peter Bach of Memorial Sloan Kettering has warned that in some cases, authorized generics aren’t about helping patients-they’re about protecting profits. If the brand company can control the timing and pricing of the first wave of generics, they can avoid the steep price drops that usually follow patent expiration.

Still, the data doesn’t support the idea that authorized generics are more expensive than other generics over time. The FTC found no evidence that AGs lead to higher prices in the long run. In fact, they often trigger faster, deeper price cuts than traditional generics alone.

What This Means for You

If you’re paying for a brand-name drug, ask your pharmacist: “Is there an authorized generic for this?”

It’s not always obvious. The label won’t say “authorized generic.” But pharmacists have access to databases that show which drugs have them. If one exists, you can often get it for less than the brand-even if your insurance doesn’t favor it.

Also, check your formulary. If your plan puts the brand and the authorized generic on the same tier, ask if you can switch. Many insurers will let you change without penalty if you ask. And if you’re on Medicare, remember: the Inflation Reduction Act caps your out-of-pocket drug costs at $2,000 a year. Choosing an authorized generic could help you stay under that limit longer.

Don’t assume the brand is better. Don’t assume the cheapest generic is the best. Ask questions. Know your options. And remember: sometimes, the most affordable version of your medicine is the one that’s literally identical to what you’ve always taken-just without the brand name.

How to Find Authorized Generics

Here’s how to spot them:

1. Ask your pharmacist directly. They can check the FDA’s quarterly list of authorized generics.
2. Use tools like GoodRx or SingleCare. They often list authorized generics separately from traditional generics.
3. Check the FDA’s website for the latest authorized generic list (updated every quarter).
4. Look at the pill’s imprint code. If it matches the brand, it’s likely an authorized generic.

Some common examples: Simvastatin (authorized generic of Zocor), Levothyroxine (authorized generic of Synthroid), Fluticasone (authorized generic of Flonase).

There are currently 137 authorized generics on the FDA’s list as of October 2023. That number is growing.

Final Thought: It’s Not About the Label. It’s About the Pill.

Pharmaceutical companies aren’t charities. They’re businesses. Authorized generics exist because they make financial sense-for the company and for the consumer. They’re a way to keep some revenue flowing after the patent expires, while still giving patients a cheaper option.

But here’s the bottom line: You’re not getting a lesser drug. You’re getting the same drug, at a lower price. And in a system where medication costs can break budgets, that’s not just smart-it’s essential.